As fears of a new war with Hezbollah or Hamas have grown in recent months, Israelis can now count on another line of defense against missiles. When Iron Dome and Patriot missiles fall, the insurer Phoenix is now offering Israeli homeowners insurance against damage to their homes' contents.
The policy is the first ever in Israel to cover war damage. Until now, the responsibility has been with the state because private insurers deemed the risk too large, and because there wasn’t any way of getting reinsurance to help spread the risk.
Phoenix said it was able to get reinsurance – coverage from other companies to help cover costs if an insurer has to make large payouts – letting it go ahead and offer the policies.
The policy covers all kinds of damage to a home’s contents from war or terror attacks, but according to Shlomo Miller, Phoenix’s senior vice president for general insurance, in the current environment rockets and missiles are the things most likely to do damage.
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“The problem that this policy offers a solution for is a missile attack. People are insured against earthquakes, but actually there has been more damage from missiles than from earthquakes,” he said. “We’re offering a solution that hasn’t existed until now, and we’re the only ones in Israel that are giving this coverage.”
Israel is located along the geologically unstable Syria-Africa Rift, which runs along the Jordanian border, and a major earthquake occurs every 80 to 100 years. The last major temblor to hit Israel was in 1927, which claimed some 500 lives and registered a 6.2 magnitude.
During the 2014 Gaza war, Hamas fired nearly 5,000 rockets and mortar shells at Israel; the tax authority says 4,572 compensation claims were filed for damage to buildings and vehicles. By a year after the war it had paid out more than $31 million in compensation.
The next war might cause a lot more damage. Lebanon’s Hezbollah is estimated to have an arsenal of 100,000 rockets, on top of the threat that has emerged more recently: an assault by Iran or its proxies in Syria.
The Israeli government provides basic coverage for damage done to the content of homes from war. It provides payments of 88,000 shekels ($24,700) per couple and 9,104 shekels per child under 18.
If a family wants extra coverage, it can be bought through the Israel Tax Authority’s property tax division. The premium is 0.3% of the value of the property being insured up to a value of 893,000 shekels. It doesn’t cover things like artwork, jewelry or antiques.
To date only six families have taken out the supplementary coverage, according to the tax authority. Phoenix’s Miller says the scant interest proves that Israelis aren’t alert to the risk they are undertaking without coverage. He added that he didn’t believe that the government’s supplementary insurance was a good deal.
The Phoenix policy seems to offer better terms, although less so when taking into consideration the fine print. The company offers coverage of up to $1 million on all war damage, and the annual premium is just 0.1%. Unlike the property tax coverage, Phoenix’s plan includes art, jewelry and antiques.
But the Phoenix coverage only kicks in after the government has paid out the minimum compensation it guarantees, so that in the event of small and moderate damage the company will probably owe the policyholder nothing – although it will pay 10% of the damage covered by the state.
In any case, the annual premium on ordinary non-war-related coverage for household contents is 0.3%, thus the 0.1% is an addition, not the full coverage. Nor does it cover built-in fixtures like kitchen cabinets or central air conditioning.
So is a Phoenix policy worthwhile? Gemolab Appraisals, which provides valuation services of house contents for insurers, estimates that the average insured home in Israel has 350,000 shekels of contents, of which 81,000 comprises art, jewelry and antiques.
In the areas of Israel where the risk of missile damage is the highest, like the south, which is in rocket range of Hamas, the value of an average home’s contents is 10% lower than the Israeli average. But the Phoenix doesn’t adjust its premiums by region.
For a home with contents valued at 200,000 shekels or less, the Phoenix premium will be higher than the property tax premium. A couple with two children under 18 is entitled to coverage of up to 106,000 shekels – and the amount grows with each additional child. If, for instance, they have contents worth 160,000, they need only pay the supplementary premium for the remaining 54,000 shekels.
Phoenix demands a minimum premium for its coverage of 254 shekels a year, but for the supplementary state insurance in that case the premium would be just 162 shekels.